EXC or PNW: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the Utility - Electric Power sector might want to consider either Exelon (EXC) or Pinnacle West (PNW). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Exelon has a Zacks Rank of #2 (Buy), while Pinnacle West has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that EXC is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

EXC currently has a forward P/E ratio of 16.05, while PNW has a forward P/E of 22.47. We also note that EXC has a PEG ratio of 2.66. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. PNW currently has a PEG ratio of 3.87.

Another notable valuation metric for EXC is its P/B ratio of 1.6. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, PNW has a P/B of 1.81.

These metrics, and several others, help EXC earn a Value grade of B, while PNW has been given a Value grade of C.

EXC stands above PNW thanks to its solid earnings outlook, and based on these valuation figures, we also feel that EXC is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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